BATS Chi-X Europe, the new pan-European equities trading group being formed by BATS Global Markets' acquisition of Chi-X Europe, is interested in possibly launching a derivatives trading platform, a senior BATS executive said Friday.

The potential new service would be a challenge to the derivatives-trading capabilities of another exchange group which would result from Deutsche Boerse AG's (DB1.XE) planned acquisition of NYSE Euronext (NYX).

"Derivatives would be interesting for us," BATS Europe Chief Executive Mark Hemsley told Dow Jones Newswires.

"If you look at the Deutsche Boerse-NYSE deal, you're looking at a potential monopoly in Europe on derivatives. I think what we have in BATS Chi-X Europe is exactly the sort of organization the industry could look to challenge that monopoly," Hemsley said.

The comments come after BATS announced Friday that it will buy Chi-X Europe, its erstwhile rival in pan-European equities trading. They also come before the launch of the London Stock Exchange Group PLC's (LSE.LN) new pan-European equity derivatives business in the second quarter.

LSE CEO Xavier Rolet, who is leading the LSE's acquisition of Canada's TMX Group Inc (X.T), said previously that the derivatives market in Europe is dominated by the "duopoly" of heavyweights NYSE Liffe, which is operated by NYSE Euronext, and Eurex, run by Deutsche Boerse.

Liffe and Eurex have an annual combined derivatives revenue of around EUR1.2 billion.

Hemsley said that looking more closely into derivatives trading may come only after the integration of BATS and Chi-X, as well the adoption of BATS' trading technology.

"Our first priority is on the cash equities side," Hemsley said.

"One of the capabilities that BATS brings is that we have an extremely strong options trading platform, which is Libor-ready in the U.S., that we've run up internally to over a million messages per second. We have a superb derivatives trading environment that could possibly be brought to bear fruit on the European market," he said.

Hemsley said he expects BATS Chi-X Europe to continue grabbing market share in European equities trading.

"The idea is that we will have a trading platform that will combine the market share of the two existing organizations. And then we're able to offer more liquidity in a single location, a single trading venue, and we can offer sophisticated technology," Hemsley said.

"That should be something which would be attractive to the trading community, particularly if we continue to offer the aggressive pricing that has been the trademark of both companies," he said.

Data from Thomson Reuters show that the combined market share of equity trading volume in the European Union for Chi-X and BATS has increased to 19.2% in December 2010 from 16.6% the year before.

Hemsley said BATS is also open to further acquisitions. "We will keep our eyes open and we'll evaluate opportunities. What we would look for are companies that fit extremely well."

He said Chi-X was a good fit for BATS because "Chi-X was considering anyway to refresh their equities trading technology...BATS is able to offer that next-generation technology to them."

"That's positive for the cash equities market and provides a strong basis for the move into other asset classes in the future as well," he said.

- By Vladimir Guevarra, Dow Jones Newswires. Tel. +44 (0) 2078429486, vladimir.guevarra@dowjones.com
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